GERMANY is staring at possible recession as the country’s central bank yesterday slashed its growth forecast in the face of deepening eurozone gloom.

The impact of the eurozone debt crisis was reflected in a surprise fall in German industrial product []

The Bundesbank said it expects Europe’s powerhouse economy to grow by just 0.4 per cent in 2013, compared with its June forecast of 1.6 per cent, but warned that economic activity may fall in the final quarter of 2012 and the first three months of next year, thus representing a recession.

The impact of the eurozone debt crisis and sluggish global growth was reflected in a surprise 2.6 per cent fall in German industrial production in October, the largest monthly decline since April 2009.

The Bundesbank said: “Given the difficult situation in some euro-area countries, economic growth will be lower than assumed. The cyclical outlook for the German economy has dimmed. Enterprises are cutting back their investment and hiring fewer new staff.”

The cyclical outlook for the German economy has dimmed

The Bundesbank

The news sent the euro lower against the US dollar as expectations rose that the European Central Bank would cut interest rates early next year. Simon Smith, chief economist at broker FxPro Forex, said: “It’s difficult to see how Germany could escape a mild recession if growth slumps to this level.”